UB - External Factors Flashcards
5 political factors
- changing laws and legislation
- changing income tax rates
- changing VAT rates
- public spending on infrastructure
- changing corporation tax
Changing law and legislation
+ ‘zero waste Scotland’ and by complying companies get good PR
- increase minimum wage and increase expenses
Changing income tax rates
+ reduce income tax and give more disposable income
- increase income tax and give lower disposable income
Changing VAT rates
+ lower VAT lowers cost for products
- increase VAT increase selling price
Public spending of infrastructure
+ fund development of motorways, increases customer base for certain areas
+ public spending creates jobs so more disposable income
- only improves certain areas
Changing corporation tax
+ lower would increase profits
- increase would lower profits
Economic cycle stages
- boom
- recession
- recovery
Boom
- GDP, employment and demand for products high
= businesses can increase prices due to demand
= inflation occurs, need to rise wages
Recession
- GDP and employment levels fall
= redundancy payments and loss of skilled labour
= prices cut to increase demand
Recovery
- GDP and employment begins to rise
= increased sales due to increased disposable income
= new products and increase prices
Economic policy - fiscal policy and monetary policy
- fiscal is tax rates and level of public spending
- monetary is controlling supply of money - varying interest rates
Rise in interest rates - effects on borrowing and saving
- customers more likely to save
- customers less likely to borrow
Reduction in interest rates - effects on borrowing and saving
- customers less likely to save as interest rates bad
- customers more likely to borrow
Strong pound - effect on exports and imports
- exporters sell poorly as more expensive
- imports become cheaper, lower price
Weak pound - effect on exports and imports
- exporters can sell well as cheaper
- imports more expensive
